Friday, October 14, 2016

September retail sales: positive with one fly in the ointment

As you all probably already know, real retail sales is one of my favorite metrics. I haven't looked at it in a little while, so this morning's report is a good opportunity to catch up.

The below graph shows nominal (blue) and real (red) retail sales.

With a nice +0.6% increase in September, nominal retail sales are at another record. So long as consumer prices have not increased by more than 0.2% (we'll find out next week), real retail sales set another record as well.

Further, sales lead jobs. The direction of the YoY rate of change in retail sales tends to lead YoY payroll growth by 6 - 12 months. Here are the last 10 years ending August:

This argues that YoY job growth is likely to be stable to slightly decelerating in the next few months, a somewhat contrary signal to that given by the Labor Market Conditions Index released several days ago.

Finally, the one fly in the ointment is that, between anticipated inflation in September, plus normal population growth of about .075% per month, it is unlikely that real retail sales per capita will be better than flat compared with June and July:

Real retail sales per capita is a long leading indicator, and this suggests it will have made no improvement over the last 4 months.

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